In Business Model, Internet Access, Mobile

Comcast, AT&T, Reliance Jio and SingTel are among the more-salient tier-one suppliers that aim to recreate their businesses, taking new positions elsewhere in the value chain, rather than relying solely on connectivity revenues. Most telcos will not be able to do so, and many will ridicule the effort. “Stick to what you know” is the advice that will often be given.

The problem is that “what you know” may not be enough to keep revenues or profits where they are, longer term. Do nothing and half your revenue is gone in 10 years (along with all your profits). So the inescapable conclusion seems to some of us clear enough: connectivity revenues alone will not sustain tier-one service providers.

“Reliance Jio’s business model will be fully realized as it shifts gears to becoming a media, content and advertising company, similar to what Verizon and AT&T have been trying to achieve with a series of multibillion-dollar acquisitions over the past two years,” says analyst Neil Shah.

Though few other tier-one service providers are likely to be so aggressive, Jio basically has sought to commoditize voice and data access revenues, while building the revenue model on hardware, software, apps, content and other services.

Jio offers Jio TV (live TV), Jio Cinema (on-demand movies, TV shows), Jio Music (streaming music store with millions of HD songs in 17 languages), Jio Tunes (caller tunes), Jio Mags, Jio XpressNews, Jio Newspaper (news, newspaper and magazines), Jio Money (mobile wallet for online and offline transactions), Jio Cloud (free and paid cloud storage subscription), Jio Security (antivirus, device security and privacy) and more, says Shah.

The next step involves rolling out Jio GigaFiber across 1100 cities nationwide to enable a quad-play strategy. This quad play would involve offering FTTH broadband internet, TV content packages, voice and smart home offerings, says Shah.

But few tier-one suppliers globally will have the scale to take such an approach.

Telecom service provider business models have diverged in the competitive era, and likely will continue to move apart over the next decade. Some service providers will concentrate on connectivity; others will move into other segments of the internet value chain. A relative few carriers will remain globally focused; most others will have to concentrate on one or a few countries.

Some service providers will operate across mobile and fixed realms; others will remain in one or the other. It also is possible that at least some application, platform or device suppliers themselves take on “connectivity” functions on a wider scale.

That would be especially disruptive as the business model will rely on revenues generated elsewhere in the value chain (advertising, marketing, commerce and transactions, content) while integrating connectivity either as support operations, as services that basically aim only to cover cost or possibly as retail operations.

One of the bigger differences will be between tier-one providers that use connectivity to support other operations, and those operators who maintain a primary reliance on connectivity revenues as the mainstay of the business.

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